India’s e-commerce policy may end the Flipkart-Amazon discount war

The over $38 billion Indian e-commerce sector’s free run may be ending.

On July 30, a government think-tank set up to form a comprehensive policy framework for the industry, submitted its report. It has under its purview everything, from consumer protection to logistics and even server localisation.

“The recommendations…look at fairness in these (online) marketplaces and also put a check on predatory pricing,” Anup Wadhawan, commerce secretary-designate, said at a press briefing. “We will process these recommendations and will see how to incorporate them. We will bring out the policy at the earliest.”

Wadhawan did not share details of the report.

The e-commerce think-tank is chaired by commerce and industry minister Suresh Prabhu and includes officials from the ministries of finance, corporate affairs, electronics and information technology (IT), and home affairs. It also includes representatives from telecom, IT, and e-commerce industries.

The recommendations are said to include three key measures that could challenge the industry: data localisation, an inventory-based model for domestically produced items, and a sunset clause for discounts.

Data localisation

It has been suggested that all data collected by companies from Indians must be mandatorily stored at data centres located within the country, sources said.

This is in line with the justice Srikrishna committee’s recommendationsfor a data protection framework. Released on July 27, the draft proposals by this panel suggest that companies—domestic or foreign—collecting data from Indians must maintain a copy of these data on servers located within the country.

If the e-commerce recommendations are accepted, that will substantially increase costs for companies.

Promoting made in India

The think-tank has recommended special policies to promote made-in-India products.

For instance, the government may allow e-commerce marketplaces, which can only connect sellers with buyers as of now, to hold an inventory of goods that are 100% manufactured in India, sources said. This facility will only be open to firms whose founders or promoters are residents of India and where foreign equity does not exceed 49%.

A commerce ministry official confirming the recommendation told Quartz that the clause is meant to support local manufacturing and small-scale industries. However, the source admitted that it would be hard to implement.

“What needs to be seen carefully is how to determine what is manufactured 100% in India,” the official said. “In absolute terms, that’ll only be agricultural products. How do you say it’s 100% made in India for manufactured products? These intricacies have to be looked into.”

Barriers to deep discounting

The policy will look to end the pricing war in the Indian e-commerce space.

The think-tank has recommended setting a maximum duration for differential pricing or deep discounts.

Low prices have so far been one of the biggest lures for Indian online shoppers. While online market places are restricted from influencing selling prices in India, companies like Flipkart and Amazon frequently host big-bang sales to boost sales.

If the new policy comes into play, this practice will end.

Draft e-commerce policy gets the strategic intent right

India’s national draft e-commerce policy which was unveiled on Monday gives the first clear sense of the framework government has in mind for the rapidly evolving sector. An important part of the draft overlaps the recommendations of the BN Srikrishna panel on data protection. Therefore, prior to finalising an e-commerce policy government has to make sure that all laws dealing with data, privacy, and digital transactions are consistent. A bird’s-eye view of the e-commerce policy suggests that there is an emphasis on using the platform more strategically to promote Indian entrepreneurship. This is unexceptionable and deserves support.

The challenge, however, will lie in the approach to actualise the overarching aim and the trade-offs which have to be made. The backdrop to all the reports is that the digital world seamlessly spans national boundaries and has evolved fast. Therefore, justifiable steps such as an insistence on data localisation have to be balanced by the awareness that Indian start-ups should not be penalised by raising entry barriers through additional costs. Similarly, while it may be necessary to tweak legislation to assist Indian entrepreneurs who wish to retain control, access to capital should not become cumbersome as it acts as a barrier to first generation entrepreneurs. Given these complexities, the current approach is sensible as it fleshes out a policy and opens it to adjustments based on stakeholder feedback.

Flipkart Offers US Footwear Brand Skechers Out-Of-Court Settlement In Fake Products Case

In December 2017, Skechers had accused Flipkart and four of its sellers of selling fake 'Skechers' products

One of Flipkart's biggest sellers — MarcoWagon — is also a suspect in the case

Marco Wagon, in turn, accused Flipkart of making it import Skechers shoes from suppliers in China

Six months after filing a case against Flipkart, US-based footwear brand Skechers has been offered an out-of-court settlement by the Walmart-backed company.

“Flipkart has offered some cash payment and a commitment to do a certain amount of business for Skechers as an offer to settle out of court,” said a person aware of the matter to ET.

An email sent to both Flipkart and Skechers did not elicit any response till the time of publication.

Flipkart Vs Skechers: What’s The Case?

Here is the series of events leading up to Flipkart’s offer for an out-of-court settlement to Skechers:

• In December 2017, Skechers filed cases in the Delhi high court against online sellers for selling fake products under the Skechers brand name
• The accused included Flipkart and four of its sellers — Retail Net, Tech Connect, Unichem Logistics, and MarcoWagon
• Earlier, Skechers, with the help of court-appointed local commissioners, raided seven warehouses of the sellers in Delhi and Ahmedabad
• 15,000 pairs of fake ‘Skechers’ shoes were found during the raids

At that point in time, Skechers had issued a statement that said: “Flipkart is an online marketplace that helps sellers connect with customers across the country, We only act as an intermediary. We conduct our business with the highest standards of integrity and are fully compliant with all the rules of the land. We cannot comment on the current issue as it is sub-judice.

Earlier, an investigation by News18 revealed that 60% of the sports goods and 40% of the apparel being sold in online “sales” on ecommerce platforms such as Flipkart, Shopclues, and Snapdeal were fake. The report said that manufacturers of fakes and counterfeit sellers were using “loopholes in the Information Technology Act to sell such products while online retailers were shrugging off responsibility by claiming to be intermediaries.”

Paytm Buys 10-Acre Plot To Build New Office Campus Along Noida Expressway

Paytm's will shift its headquarters to its new office in Sector 137 along Noida Expressway in Uttar Pradesh

The office will support Paytm's aggressive growth and plans to recruit 10,000 employees annually

Property consultants peg the deal size at INR 120-150 Cr

One97 Communications, which owns Indian e-commerce payment system and digital wallet company Paytm, is building its new, dedicated office campus in Sector 137 along Noida Expressway in Uttar Pradesh. Paytm’s new office campus will be spread across 10 acres.

Upon completion, this new office will serve as Paytm’s headquarters and will become the axis of its increased scale of operations.

“While adding a new chapter to the expansion of Paytm, this office campus will serve as the hub for the company to grow its operations while creating thousands of new jobs,” the company said in a media statement.

The new office campus is expected to offer world-class facilities and equipment and to accommodate more than 15,000 employees. It will be a green campus incorporating eco-friendly architecture.

Property consultants peg the deal size at INR 120-150 Cr, based on the current market price of INR 12-15 Cr per acre in Sector 137, which lies just off the Noida Expressway. Reports further said that One97 Communications purchased the land directly from the Noida Authority, the nodal body for managing Noida’s infrastructure.

Paytm Multiplying Its Growth

Launched in 2010 by Vijay Shekhar Sharma, Paytm currently has 20K employees.Of these, 760 work out of Paytm’s present 48,000 sq ft head office in Noida, and the remaining work from its other offices in Delhi-NCR, Mumbai, Bengaluru, Chennai, and Kolkata.

Amid Shutdown News, eBay.in Looks To Acquire ShopClues For India Relaunch

eBay has reportedly held talks for a merger with some ecommerce players, including ShopClues

eBay had earlier said that it is looking at a relaunch in India

eBay.in operations to shut down on August 14, 2018

After breaking up a strategic partnership with Indian ecommerce company Flipkart, global online retailer eBay may now join forces with another ecommerce company — ShopClues — to relaunch its platform in India.

Reports have surfaced that eBay is exploring fresh options to maintain its presence in India and has held talks for a merger with some ecommerce players, including ShopClues.

These talks may conclude with the acquisition of ShopClues by eBay.

At the same time, eBay stated that it is looking at a relaunch in India for “cross-border trade play.”

An email query sent to eBay didn’t elicit any response till the time of publication. ShopClues said it did not want to comment on market speculation.

Inc42 recently reported that Flipkart has now decided to shut down eBay.in, with plans to launch its own platform to sell refurbished goods. The company believes that the new platform has a different value proposition compared to its portfolio of services and will cater to a different target audience.

The operations of ebay.in will be shut down with effect from August 14, 2018.

In an email to employees, Flipkart chief executive Kalyan Krishnamurthy said: “Based on our learnings at eBay.in, we have built a brand new value platform launching with refurbished goods — a large market which is predominantly unorganised. With Flipkart’s customer base and F1 Info Solutions & Services in our group portfolio, I believe that we can solve the key barriers to refurbished — trust & convenience — at scale.”

ShopClues: Strengthening Reach In India

Founded in July 2011 by Sandeep Aggarwal, Radhika Aggarwal, and Sanjay Sethi,ShopClues is a managed marketplace that aims to provide a unique online shopping experience to its customers.

The company raised $100 Mn at a $1.1 Bn valuation from GIC, Tiger Global Management, and Nexus Venture Partners in January 2016 and $100 Mn in a Series D round in January 2015.

Reports speculated that ShopClues has held talks with multiple ecommerce players in recent months for a potential sale.

It recently raised a $10 Mn bridge round from existing investors and a fresh round of funding from Singapore’s GIC, though the amount was not disclosed.

ShopClues had reportedly received another $1 Mn infusion from its US-based parent company, Clues Network. ShopClues saw its revenues rise by 45% to $40.01 Mn (INR 275 Cr) in 2017-18 while its losses narrowed to $30.36 Mn (INR 208 Cr).

eBay: Going Solo After Failed Duet

eBay entered the Indian market way back in 2004. It started operations with the acquisition of the News Corp-backed Bazee.com.

Later, it also invested a significant amount in ecommerce player Snapdeal to claim a pie of the burgeoning Indian ecommerce market and eventually wrote down a $61 Mn investment in the e-tailer in February 2018.

However, despite being a first mover in the sector, the company continued to struggle to create a strong position in the Indian market, which is dominated by Flipkart and Amazon India.

With a strategic investment of $500 Mn by eBay in Flipkart last year, the two companies entered into a strategic partnership. After Flipkart acquired eBay’sIndia operations last year, it decided to use the latter’s platform for global outsourcing.

In a media statement after Walmart’s acquisition of Flipkart, eBay had said, “We plan to relaunch eBay India with a differentiated offer to focus initially on the cross-border trade opportunity, which we believe is significant. We believe that there is huge growth potential for ecommerce in India and significant opportunity for multiple players to succeed in India’s diverse, domestic market.”

With the Indian ecommerce market size expected to touch $200 Bn by 2020, eBay’s plans to look for fresh options reiterates the fact that everyone wants a slice of the India pie. Ebay may be once bitten, but it’s not shy to try its luck a second time.

India cautions against attempts to formulate e-commerce rules outside WTO framework

India has warned that attempts by developed countries to frame rules on e-commerce outside the World Trade Organization (WTO) framework could undermine the consensus principle at the multilateral body, as there is an existing mandate for similar discussions to take place within the WTO.

In a statement at the informal trade negotiating body meeting at Geneva, India’s WTO ambassador J.S. Deepak said that though proponents are suggesting that these are new pathways and approaches to multilateral agreements, India does not see the advantages of this approach and feels that this would further undermine multilateral work, mandates and the consensus principle.

During the Buenos Aires Ministerial of WTO in December last year, 71 members led by countries like China, Japan and the US in a joint statement said they would initiate exploratory work towards future WTO negotiations on trade-related aspects of electronic commerce.

India plans to bring out a national e-commerce policy in next three months as lack of a domestic policy prevents it from taking a firm stand on the matter at WTO.

South Africa and India in a submission to WTO have proposed that “electronic transmission” under e-commerce be clearly defined as the present moratorium on customs duties on electronic transmissions could imply a loss of competitiveness for developing countries who have higher tariffs on physical products while the same products in digital form attract zero duty.

Deepak said India believes that while e-commerce can bring transformational changes and opportunities in trade and investment, it also poses significant infrastructure, regulatory and other challenges, particularly for developing countries which will not benefit from the opportunity due to the huge digital divide.

India also opposed the introduction of new issues such as investment facilitation and MSMEs (micro, small and medium enterprises) in the WTO agenda till existing mandates have been addressed.

Somewhat miffed with the WTO secretariat for not following a member-driven process while deciding the work programme, Deepak said: “The work of the secretariat should be based on mandates rather than areas for which funds are available. We would not like to see the day where the golden rule in the WTO becomes: one who has the gold, makes the rules! Or even decides the work programme or the areas on which we work!”

Cash-on-delivery deals by e-commerce firms not authorised, says RBI

Cash-on-delivery (CoD) method of payment option provided by online retailers such as Flipkart and Amazon may be a regulatory grey area as per the Reserve Bank of India's (RBI's) response to a Right to Information (RTI) query, according to a report in The Economic Times.

The RBI, in a response to an RTI query, said a collection of payment from platforms such as Amazon and Flipkart are not authorised.

“Aggregators/payment intermediaries like Amazon and Flipkart are not authorised under Section 8 of the PSS (Payments and Settlements Systems) Act, 2007,” the apex bank said in its response to the query filed by Dharmendra Kumar of India FDI Watch.

The RTI query asked the RBI to confirm if cash-on-delivery payment collection and disbursement to e-commerce merchants or marketplaces such as Flipkart and Amazon are authorised under the Payments and Settlements Systems Act, 2007.

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While the Act mentions electronic and online payment, it does not explicitly mention about money received through the cash-on-delivery route.

“RBI has not issued any specific instruction in this regard,” RBI said in its reply.

Under the CoD method of payment, Flipkart, Amazon and other marketplaces collect cash from customers on behalf of third-party vendors when the goods are delivered.

Legal experts, however, say that the rules do not necessarily invalidate cash-on-delivery.

"This by no means makes the cash-on-delivery model illegal or unauthorised,” Abhishek A Rastogi, a partner at Khaitan & Co told the paper, adding that the Payment and Settlement Systems Act, 2007 should apply to cash-on-delivery transactions by e-commerce operators.

Kumar, however, said that there must be a grey area in the law they (e-commerce) are exploiting by collecting cash-on-delivery on behalf of merchants without RBI’s authorisation.

Experts believe that CoD is one of the reasons why e-commerce gained a foothold in India.

India’s online retailing business is estimated to grow by more than 1,200 percent to $200 billion by 2026, according to a Morgan Stanley report. The report estimated that online retail would account for 12 percent of the country’s retail market by then.

oworking Space Provider Awfis Raises $20 Mn In Series C Funding

Awfis plans to use the funding to expand its operations to new cities, especially Tier 2 ones

Existing investors Sequoia Capital, TTS:IO, and InnoVen Capital participated in the funding round

The valuation of the company has reached more than $130.8 Mn (INR 900 Cr)

Collaborative coworking space provider Awfis has raised $20 Mn in a Series C funding round from existing investors Sequoia Capital, The Three Sisters: Institutional Office (TTS:IO), and InnoVen Capital.

Awfis was founded by Amit Ramani in 2015, with strategic backing from The Three Sisters: Institutional Office (TTS:IO). It offers customers the facility to book workplaces for durations ranging from an hour to 11 months.

It is being speculated that, with the latest funding, the valuation of the company has reached more than $130.8 Mn (INR 900 Cr).

Awfis plans to use the funding to bolster and deepen the Awfis network across India, launch new and innovative products/services and further enhance the existing technology platform.

Till date, the company has raised about $51 Mn in risk capital, including a $20 Mn Series B round from Sequoia in April 2017.

Abhay Pandey, Managing Director, Sequoia Capital – India said “We are thrilled with the demand side traction for Awfis product especially from SMEs and Corporates, thereby validating our hypothesis of a massive market opportunity. Awfis has generated tremendous momentum with its unique supply acquisition models. It is re-creating the workspace landscape for the benefit of both tenants and landlords.”

Troubled Ecommerce Company Snapdeal Claims It Became Cash Flow Positive In June

In a letter to the Snapdeal “family”, founders Kunal Bahl and Rohit Bansal shared that the company has been cash flow positive in June 2018

The founders stated that “stellar professionals” and former "SDians" have joined the company

Chief strategy officer Jason Kothari had recently called it quits with the company

There’s finally some good news for troubled ecommerce company Snapdeal — it claimed it turned cash flow positive in June this year.

Snapdeal, which once held the No. 2 spot in the Indian ecommerce industry, has been in troubled waters for the past few years, with frequent office changes, bursts of hirings alternated with layoffs, and investors writing down investments. It was even dragged to the courts by some of its sellers over alleged non-payment of dues.

In a letter to the Snapdeal “family”, founders Kunal Bahl and Rohit Bansal said: “The last 10 months at Snapdeal have been one of immense focus, determination, and sharp execution. We exited a period of great uncertainty in July last year and strode ahead confidently on our chosen path to create a self-sustaining business.”

The founders shared that the company has been cash flow positive in June 2018 which means that the company is now earning money from its business.

The duo shared that they have achieved this target ahead of demanding deadline they had set for the company.

Amazon Prime Day Vs Flipkart’s Big Shopping Days: The 2018 Online Sale Showcase

Bringing its global event Prime Day to India for the first time, Amazon India offered 200 exclusive new product launches, thousands of deals, and video and music selections especially curated for Prime Day. The Prime Day offers stretched further for one week on Prime Music and Video as well.

The research company RedSeer has analysed customer perspective to these sales.

Here are a few highlights from the customer front:

• Awareness of the Amazon or Flipkart sale is 60% compared to 100% in BBD/Great India Sale last year
• Flipkart has a 60% mindshare during sale days compared to 40% for Amazon
• 59% of respondents have bought on Flipkart while 41% have bought on Amazon (10% overlapping on both)
• 68% of the respondents knew about the sale through low-cost digital channels
• 39% of the customer purchased consumer electronics on Flipkart followed by Fashion while 35% of the customers purchased Fashion on Amazon followed by Mobiles
• 60% of the consumers on Flipkart spent more than INR 5000 during the sale, while 70% of the consumers on Amazon spent more than INR 5000 during the sale
• The use of PhonePe was 13% of the total payments on Flipkart while 9% of Amazon customers used Amazon Pay

So, Who Nailed It: Flipkart Or Amazon India?

Amit Agarwal, senior vice-president and country head, Amazon India, said, “Extending Prime Day to 36 hours this year allowed us to further reward members with unbeatable deals, access to exclusive new products, and unforgettable experiences that highlight the many benefits of a Prime membership. We also want to thank our sellers, brands and our content partners who helped to make Prime Day bigger and better.”

To be noted, members streamed music in 18 Indian and international languages on Prime Music in the week leading up to Prime Day. The week leading up to Prime Day was Prime Video’s best ever, with the highest number of streamers in India ever, as claimed by the company.

On the other hand, according to Smrithi Ravichandran, Senior Director, Flipkart, “During Big Shopping Days, the success of the sale is a testimony to our customer’s faith in us, making us as the destination where India shops. We are overwhelmed to see the RedSeer survey findings that reinstate our commitment and celebrate this success.”

Some of the unconventional categories that were a great success during this sale included Furniture and IoT other than the hot categories like mobiles, fashion and appliances, she added.

Amazon Vs Flipkart: Expanding Product Categories

Recently reports surfaced that Flipkart is working to triple its warehouse workforcefor upcoming festive season sale Big Billion Days.

Following the Walmart acquisition, Flipkart has been increasing its commitment to the Indian market with several new initiatives, including a foray into fintech for which it has sought NBFC certification. Flipkart has also set its next target — a gross merchandise value (GMV) of $17.6 Bn by 2020-21.

It must also be noted that a Forrester report had recently revealed that Flipkart’s standalone market share was estimated to be 31.9% at the end of 2017 while Amazon India’s was 31.1%.

Amazon had started out in India with a 14% share in 2015 against 43% of Flipkart. Citi Research estimates that Amazon India is currently in second place in the Indian ecommerce market with about $5 Bn in GMV.

Amazon had committed $5 Bn investment in India. Recently, Amazon opened 15 fulfilment centres in Bengaluru, Delhi, Hyderabad and Mumbai to create a specialised network for Amazon Now.

A Citi Research report had said that Amazon India is expected to reach $70 Bn in gross merchandise volume (GMV) and $11 Bn in net sales by 2027. The same report valued Amazon India at $16 Bn.

While Amazon India’s food retail plans have hit a roadblock, the company continues to expand its portfolio and has onboarded Indian handloom weavers, and also introduced Shutterbug.

At the same time, Flipkart has been expanding its bets on grocery, fashion, furniture etc as the company expects about 45% ($7.4 Bn) of its 2020-21 GMV target to be contributed by mobile phones, followed by large appliances and fashion at $2.7 Bn and $2.6 Bn, respectively. Groceries are expected to contribute another $1 Bn.

As the festive season sales preparations start for the ecommerce giants, customers can buy an increasing range of products on these platforms. But though the ecommerce giants may entice online shoppers with such sales, will they be able to taste the real success that comes with balance sheets showing profitability in this financial year?

Amazon Employee And Ex-Delivery Boy Arrested For Cheating Customers, Company

A current Amazon employee was allegedly providing the accused details of customers who wished to return products

The accused ex-delivery boy would collect the items from customers before the authorised delivery boy could arrive

The duo would then sell the stolen products in New Delhi's Gaffar market and split the money

At a time when the Centre is working on rolling out an ecommerce policy and a think tank is already in place, a case of fraud and theft perpetrated jointly by a current employee of Amazon India and a former delivery boy has come to the fore.

Reports have surfaced that an Amazon employee and a former delivery executive were arrested for allegedly cheating the company and its customers. They would collect items scheduled for return before authorised personnel could pick up the product and steal them.

Police have said that the current Amazon India employee who was arrested would allegedly provide the accused with details of customers who wished to return their products.

An email query sent to Amazon India didn’t elicit any response till the time of publication.

How The Accused Cheated Customers & Amazon India

On July 21, a complaint was filed by Ambika Saraf, an authorised representative of the Amazon branch at Nehru Place, alleging that an imposter posing as a delivery executive had collected a camera that was scheduled for return from a customer named Gaganpreet Singh.

Anto Alphonse, deputy commissioner of police (Dwarka), said that the customer received a call from one Gaurav, who posed as a delivery boy, saying he would come to collect the camera.

At the same time, Amazon’s authorised delivery executive Jasvinder Singh also called Gaganpreet and came to collect the same camera. Following this, Gaurav was arrested when he came to collect the camera at Singh’s shop in Dwarka.

An investigation into the case revealed that Gaurav worked as an Amazon delivery executive between 2015 and February 2018 in the Lawrence Road area where a person named Raju Singh was his store manager. After quitting his job, Gaurav was jobless for a while and he hatched the idea for the fraud along with Raju.

Raju would pass him the details of customers who wished to return bought items and Gaurav would collect the article from the customers before the authorised delivery boy could arrive.

The DCP also said that on July 20, the accused allegedly cheated a customer named Sanjay Kumar Bansal, a resident of Dwarka, by collecting a mobile phone worth INR 36,000 that he wished to return to Amazon.

During interrogation, Gaurav revealed that he has cheated several customers this way and would sell stolen mobile phones and laptops in Gaffar market, New Delhi.

Gaurav and Raju would split the amount received from stolen articles, the police said.

Raju Singh was also arrested. Meanwhile, police are trying to recover the stolen mobiles and laptops.

When Ecommerce Companies Became The  Target Of Frauds

There have been reported several instances of buyers and sellers trying to cheat ecommerce companies.

Recently, Flipkart filed a criminal complaint against one of its employees and its major supplier MRPL making allegations of cheating, fraud, forgery, and breach of trust.

At the time, it was also reported that the fraud extended to other expenses incurred like excise, customs, and taxes, which were paid by Flipkart. Further, the Flipkart employee had also allegedly falsified bills, invoices, and other accounting documents to cover up the fraud.

Prior to this, Flipkart filed a complaint which led to the arrest of four people from Telangana’s Warangal district for allegedly cheating the company Flipkart by ordering high-end mobile phones and then replacing them with fake ones and claiming refunds.

In December 2015, two former Amazon employees, Atul Sharma and Naveen Kumar, were arrested for trying to cheat Flipkart of over INR 50,000 by claiming that they had been sent stones instead of the ordered product.

In October 2015, a similar incident took place when Veera Swamy of Andhra Pradesh found a loophole in the return policy of Flipkart and tricked the company for over 20 months using its return policy, which resulted in the company losing over INR 20 Lakh.

With the ecommerce market set to hit $200 Bn by 2026, it is high time the national ecommerce policy is enforced to protect companies along with other stakeholders, mainly customers and sellers.

Update 1

“As India’s most trusted online marketplace we have zero tolerance towards incidents of fraud. We thank the Delhi police for their investigation and support in solving the case swiftly. We look forward to continued partnership with the police and government authorities.”